The charges were filed at the Federal High Court in Abuja by the Federal Inland Revenue Service today being 25th March 2024 In the suit with number: FHC/ABJ/CR/115/2024.

The charges levied against Binance include non-payment of Value-Added Tax, Company Income Tax, failure to file tax returns, and complicity in aiding customers to evade taxes through its platform.

It is usually challenging to determine whether tax on cross border transactions should be paid to the jurisdiction where value is created or consumed. Moreover, the general rule for taxing income of foreign enterprises in a given jurisdiction is by establishing the entity's physical presence or whether the entity has a permanent establishment in such a country. Going by the above, Binance has no physical presence or has a permanent establishment in Nigeria.

A non-residence company can also be subjected to tax in Nigeria based on profit derived from Nigeria, however, the question as to whether a foreign company is liable to pay income tax in Nigeria is usually controversial. Section 13 of Companies Income Tax (CITA) implies that a non-resident company must have a physically performed activities in Nigeria before it can be considered that such a company has income tax liability in Nigeria.

It can even be difficult for consumers of non-resident services to withhold taxes on payments to non-resident persons due to the fact that non-resident persons may not be liable to Nigerian tax under Nigerian tax laws.

In as much as there is a need for urgent actions in Nigeria to block tax revenue leakages associated with existing gaps in taxing digital economy, there is also an urgent need to review the scope of "FIXED BASE" under section 13 of CITA.

SIGNIFICANT ECONOMIC PRESENCE (SEP) AS PROVIDED UNDER FINANCE ACT 2019

In an effort to address challenges of taxing the digital economy, the Finance Act 2019 introduced the concept of significant economic presence(SEP) to expand the scope of Nigerian tax on foreign companies deriving income from Nigeria.
The Act provides that a foreign company shall have SEP in Nigeria where:
(a) It derives N25m annual gross turnover or its equivalent in other currencies from any or combination of its digital activities.
(b) Uses a Nigerian Domain name.
(c) Has a purposeful and sustained interaction with persons in Nigeria by customising its digital page or platform to target persons in Nigeria, including reflecting the prices of its product or services in Nigerian Currency.

Conclusions:
(1) Going by Section 13 of Companies Income Tax (CITA), Binance is not liable for tax under Nigerian tax laws.
(2) With the introduction of Significant Economic Presence (SEP) under Finance Act 2019, Binance is liable to be subject to tax to the extend to which they derived revenue from Nigeria.
(3) With reference to CBN circular of 5th February 2021, prohibiting all forms of Cryptocurrency transactions and declaring trading digital assets illegal, Binance is not subject to tax in Nigeria because, tax cannot be paid on any activity declared illegal.

i dont think crypto is illegal in nigeria anymore. The capital needed to run a crypto exchange in nigeria was just raised.

Abidoshaker, which side are you on?

3exe3:
i dont think crypto is illegal in nigeria anymore. The capital needed to run a crypto exchange in nigeria was just raised.

Tax is assessed on preceeding year basis. As at accounting year ended 31 December 2023 from which the evasion claim is filed, crypto trading was illegal.

Aristo3146:
Tax is assessed on preceeding year basis. As at accounting year ended 31 December 2023 from which the evasion claim is filed, crypto trading was illegal.

so their charge shld be on carrying out illegal business in nigeria?

3exe3:
so their charge shld be on carrying out illegal business in nigeria?

Nigerian govt is to charge her citizens for engaging in a business declared illegal within her jurisdiction. Binance is not domicile within the Nigerian territory.